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Amendments

Title：

Regulations Governing the Preparation of Financial Reports by Securities Firms  CH

Amended Date： 2024.01.24 
Article Content Chapter Content Search Article No. Search Legal Basis Amended Article Legislative History Chinese

Title： Regulations Governing the Preparation of Financial Reports by Securities Firms(2022.02.22)
Date：
Article 13-1     In the case of a securities firm that is a foreign company's branch within the territory of the Republic of China, unless otherwise provided by the FSC, the functions required by these Regulations to be performed by the board of directors or the supervisors shall be performed by the responsible person of the branch within the territory of the Republic of China authorized by the head office or regional headquarters of the foreign company.
Article 28     A securities firm shall provide information on its business conditions in accordance with the following:
  1. Significant business matters: The securities firm shall provide information on matters arising over the most recent 5 financial years that have had a significant impact on its business, including acquisitions of or mergers with other companies, demergers, equity investments in affiliated enterprises, reorganization, purchases or disposals of major assets, and significant changes in operation method or business activity.
  2. Remuneration to directors, supervisors, general manager, and assistant general managers, and to chairmen of the board and general managers who are rehired as consultants after retiring from the securities firm or its affiliated enterprises:
    1. The securities firm may opt either to disclose aggregate remuneration information, with the name(s) indicated for each remuneration range, or to disclose the name of each individual and the corresponding remuneration amount. For a director concurrently serving as a member of management, the remuneration shall be disclosed separately for each position held. The securities firm may adopt the aggregate disclosure method if it is a non-public company whose issued voting shares are all held, directly or indirectly, by one single person.
    2. In any of the following circumstances, the securities firm shall disclose the remuneration paid to each individual director, supervisor, general manager, assistant general manager, and consultant, provided that this rule does not apply if it is a non-public company whose issued voting shares are all held, directly or indirectly, by one single person:
      1. The securities firm's most recent capital adequacy ratio, whether unaudited, CPA-reviewed, or adjusted following FSC examination, is lower than 150 percent.
      2. There has been an after-tax deficit in the parent company only or individual financial report within the most recent 3 financial years. The preceding provision does not apply if the parent company only or individual financial report for the most recent fiscal year shows net income after tax, which is sufficient to make up the accumulated deficits.
    3. The securities firm, if a public company that has had an insufficient director shareholding percentage for 3 consecutive months or longer during the most recent financial year, shall disclose the remuneration paid to each of the directors, and, if one that has had an insufficient supervisor shareholding percentage for 3 consecutive months or longer during the most recent financial year, shall disclose the remuneration paid to each of the supervisors.
    4. The securities firm, if a public company that has had an average ratio of share pledging by directors and supervisors in excess of 50 percent in any 3 months during the most recent financial year, shall disclose the remuneration paid to each of the directors and supervisors having a ratio of pledged shares in excess of 50 percent for each such month.
    5. If the total amount of remuneration received by all of the directors and supervisors of the securities firm in their capacity as directors or supervisors of all the companies listed in the financial reports exceeds 2 percent of the net income after tax, and the remuneration received by any individual director or supervisor exceeds NT$15 million, the securities firm shall disclose the remuneration paid to that individual director or supervisor, provided that this rule does not apply if it is a non-public securities firm whose issued voting shares are all held, directly or indirectly, by one single person.
    6. If a securities firm listed on the TWSE or the TPEx is ranked in the lowest tier in the corporate governance evaluation for the most recent fiscal year, or in the most recent fiscal year or up to the date of publication of the financial report for that year, the securities firm's securities have been placed under an altered trading method, suspended from trading, delisted from the TWSE or the TPEx, or the Corporate Governance Evaluation Committee has resolved the securities firm shall be excluded from evaluation, the securities firm shall disclose the remuneration paid to each individual director and supervisor.
    7. If the average annual salary of the full-time non-supervisory employees in a TWSE or TPEx listed securities firm is less than NT$500,000 in the most recent fiscal year, the securities firm shall disclose the remuneration paid to each individual director and supervisor.
    8. If the circumstance in subitem b of item B or item F applies to a securities firm listed on the TWSE or the TPEx, it shall disclose the individual remuneration paid to each of its top five management personnel.
  3. Number of employees in non-supervisory positions, average annual employee benefit expenses for the fiscal year, and difference compared to those of the preceding year.
  4. Labor-management relations:
    1. Indicate each item of employee benefit policies, professional development, training, or retirement programs and the status of their implementation, as well as agreements between labor and management and policies for safeguarding employees' rights and interests.
    2. List the loss sustained as a result of labor disputes in the most recent financial year, together with the disclosure of an estimate of losses incurred to date or likely to be incurred in the future and the mitigation measures taken or to be taken. If the losses cannot be reasonably estimated, the securities firm shall make a statement to that effect.
    3. List any violations of the Labor Standards Act found during a labor inspection, including the disposition date, disposition reference number, the provisions breached, description of the violation, and the disposition.
  5. The following items shall be disclosed with respect to the implementation of the internal control system:
    1. Statement of the internal control system.
    2. If a CPA has been engaged to carry out a project audit of the internal control system, the CPA audit report shall be disclosed.
  6. Cyber security management:
    1. Describe the cyber security risk management framework, cyber security policies, concrete management programs, and investments in resources for cyber security management.
    2. List any losses suffered by the securities firm in the most recent fiscal year due to significant cyber security incidents, the possible impacts therefrom, and measures being or to be taken. If a reasonable estimate cannot be made, an explanation of the facts of why it cannot be made shall be provided.
  7. The term "affiliated enterprises" in this article refers to those conforming with Article 369-1 of the Company Act.
Article 30     A securities firm shall review and analyze its financial position, and financial performance, and assess risk items. The required particulars are as follows:
  1. Financial condition: The report shall explain the reason for, and impact of, any material change over the most recent 2 fiscal years in its assets, liabilities, or equity. Where the impact is of material significance, it shall further describe how the securities firm plans to respond.
  2. Financial performance: The report shall explain the reasons for any material changes over the most recent 2 fiscal years in operating income, and income before tax; forecast the securities firm's expected sales volume and provide the basis for the forecast; and describe the possible impact of such changes upon the securities firm's financial and business affairs, and how the securities firm plans to respond.
  3. Cash flows: The report shall analyze and explain any changes over the most recent fiscal year in the securities firm's cash flows; describe how the securities firm plans to address any illiquidity problems; and provide an analysis of the securities firm's cash liquidity for the coming fiscal year.
  4. The impact of any material capital expenditures over the most recent fiscal year upon the securities firm's financial and operating condition.
  5. The securities firm's policy for the most recent fiscal year on investments in other companies, the main reasons for profit/losses resulting therefrom, plans for improvement, and investment plans for the coming fiscal year.
  6. The section on risks shall analyze and assess the following matters for the most recent fiscal year and as of the day of the close of the fiscal year:
    1. The effect upon the securities firm's profits (or losses) of interest and exchange rate fluctuations and changes in the inflation rate, and response measures to be taken in the future.
    2. The securities firm's policy regarding high-risk investments, highly leveraged investments, loans to other parties, endorsements, guarantees, and derivatives transactions; the main reasons for the profits/losses generated thereby; and response measures to be taken in the future.
    3. Effect on the securities firm's financial operations of important policies adopted and changes in the legal environment at home and abroad, and measures to be taken in response.
    4. Effect on the securities firm's financial operations of developments in science and technology (including cyber security risks) as well as industrial change, and measures to be taken in response.
    5. Effect on the securities firm's crisis management of changes in the securities firm's corporate image, and measures to be taken in response.
    6. Expected benefits and possible risks associated with any merger or acquisition, and measures to be taken in response.
    7. Expected benefits and possible risks associated with any plant expansion, and measures to be taken in response.
    8. Risks associated with any consolidation of business operations, and measures to be taken in response.
    9. Effect upon and risk to the securities firm of any large transfer or changing of hands of shareholding of a director, a supervisor, or a shareholder holding greater than a 10 percent stake in the securities firm, and measures to be taken in response.
    10. Effect upon and risk to the securities firm associated with any change in governance personnel or top management, and measures to be taken in response.
    11. Litigious or non-litigious matters. List any major litigious, non-litigious, or administrative dispute that involves the securities firm or any of its directors, supervisors, general manager, any major shareholder holding a stake of greater than 10 percent, or any company or companies controlled by the securities firm, and that has been concluded by a final and conclusive judgment or is still pending. Where the outcome of such a dispute could materially affect shareholders' equity or the prices of the firm's securities, the report shall disclose the facts of the dispute, amount of money at stake in the dispute, the date of commencement of litigation, the main parties to the dispute, and the status of the dispute as of the date of the close of the fiscal year.
    12. Other significant risks, and measures to be taken in response.
  7. Crisis management mechanisms.
  8. Other important matters.
Article 31     A securities firm shall disclose the following information regarding its attesting CPAs (external auditors):
  1. Information on professional fees:
    1. The securities firm shall disclose the amounts of the audit fees and non-audit fees paid to the attesting CPAs and to the accounting firm to which they belong and to any affiliated enterprises as well as the details of non-audit services. "Audit fees" means professional fees paid by the securities firm to its CPAs for audits, reviews, and secondary reviews of financial reports, and reviews of financial forecasts.
    2. When the securities firm changes its accounting firm and the audit fees paid for the financial year in which the change took place are lower than those paid for the financial year immediately preceding the change, the amount of the audit fees before and after the change and the reason shall be disclosed.
    3. When the audit fees paid for the current financial year are lower than those paid for the immediately preceding financial year by 10 percent or more, the amount and percentage of and reason for the reduction in audit fees shall be disclosed.
  2. Information on change in CPA: If a securities firm changed its CPA during the most recent 2 financial years or any subsequent interim period, it shall disclose the following information:
    1. Regarding the former CPA:
      1. Date of and reason for the change in CPA, together with a description of whether the CPA or the securities firm terminated or discontinued the engagement.
      2. If the former CPA issued an audit report during the most recent 2 years containing an opinion other than an unqualified opinion, state the opinion and reason.
      3. Indicate whether there were any disagreements between the securities firm and the former CPA on accounting principles or practices, financial report disclosure, and auditing scope or procedure. If any such disagreements did exist, the securities firm shall describe in detail the nature of each such disagreement, how the securities firm addressed them (including whether the securities firm has authorized the former CPA to respond fully to the inquiries of the successor CPA concerning such above-mentioned disagreements), and the final results.
      4. Indicate whether the former CPA advised the securities firm that it lacked the sound internal controls necessary to develop reliable financial reports.
      5. Indicate whether the former CPA advised the securities firm that the CPA was unable to rely on the securities firm's written representations, or was unwilling to be associated with the financial reports prepared by the securities firm.
      6. Indicate whether the former CPA advised the securities firm that the scope of the audit must be expanded, or there was information showing that an expanded audit might impact the reliability of either a previously issued financial report or the financial report to be issued, but due to the change of the CPA or for any other reason, the former CPA did not expand the scope of the audit.
      7. Indicate whether the former CPA advised the securities firm that information has come to the CPA's attention that might impact the reliability of either a previously issued financial report or the financial report to be issued, but due to the change of the CPA or for any other reason, the former CPA did not address the issue.
    2. Regarding the successor CPA:
      1. Names of the successor accounting firm and CPA, and date of engagement.
      2. If prior to the formal engagement of the successor CPA, the securities firm consulted the new CPA regarding the accounting treatment of or application of accounting principles to a specific transaction, or the type of audit opinion that might be rendered on the securities firm's financial report, the securities firm shall disclose the issues that were the subjects of those consultations and the consultation results.
      3. The securities firm shall consult and obtain written views from the successor CPA regarding the matters on which the securities firm disagreed with the former CPA, and disclose information on these views.
    3. The securities firm shall by letter provide the former CPA with a copy of the disclosures it is making in response to item A and item B (c), and advise the CPA of the need to respond by letter within 10 days should the CPA disagree on any such matters. The securities firm shall disclose the content of the reply letter from the former CPA.
  3. Where the securities firm's chairperson, general manager, or any managerial officer in charge of finance or accounting matters has in the most recent year held a position at the accounting firm of its auditing CPAs or at an affiliated enterprise of such accounting firm, the name and position of the person, and the period during which the position was held, shall be disclosed. The term "affiliated enterprise" of the accounting firm of the auditing CPAs means an enterprise in which CPAs of the accounting firm to which the auditing CPAs belong hold more than 50 percent of the shares, or of which they hold more than half of the directorships, or any company or institution listed as an affiliated enterprise in the external publications or printed materials of the accounting firm of the auditing CPAs.